pRoFILES
Spreading the Sandwich
Kurt lipson
General Manager
Subway Restaurants
Kurt Lipson discusses managing his franchise and how the Subway
(Shanghai)
“QSR” (which stands for Quick Service Restaurant, in place of “fast
food”) business is catching on.
So how does this whole Subway franchise model work? But when Subway first got into China it hit a few bumps, in
Basically Subway is a different type of QSR brand much differ- part because the American model was so … foreign to Chinese
ent from like KFC, where 90% of the stores are company owned. customers. Do you think the concept of a fast food sandwich is
Subway has 32,000 stores around the globe and they own only one. catching on in Shanghai?
Subway is a complete franchise model, which means that different I do. Two years ago, 80% of our customers were foreigners, 20%
companies run the different franchises. Our company is the develop- were local, now it’s the exact opposite. We’re helping to introduce
ment agent for Shanghai and Jiangsu province. the sandwich and sandwich products into the market. There was a
perception before that a sandwich was a little refrigerated triangle
This seems like a potentially fragmented system, how do you thing that was eaten cold and did not taste so good. We give an edu-
ensure quality from local suppliers? cation on what a sandwich should be, and we give the consumer the
All of our suppliers must be approved by our headquarters in Con- creativity to create their own. We have hot toasted subs and other hot
necticut as well as the regional office in Singapore. It’s a very strict options like soup that Chinese consumers can relate to. We’re work-
process that is really important in order to have these high standards. ing to change perceptions and habits. People get to choose based on
The Singapore office does site visits, checks out warehouses and all what kind of sandwich they like and we have lots of options. The
products are approved by US importers. We also have Havi logistics first time customers come in, so many options can actually be really
deal with our foods, which is the same company that works for Mc- confusing, and they don’t know how to choose. Our servers ask them
Donalds. Our frozen products, which are mostly meats and bread, what they want and they say “Just give me whatever is good.” But you
get a Q&A check on site. Once its gets to Havi we do a triple check. can make it good how ever you want it. Once this sinks in, people
Also, we are able to keep track of exactly what products go to each think it’s pretty cool.
store, so we know what stores are buying, and they can’t replace in-
gredients with their own. How do you find the people to buy your franchise?
We do advertising in store and on some websites. What we’re look-
Do you import any of your ingredients? ing for here is a long term partnership because our franchise contract
Our vegetables for the Shanghai/Jiangsu region are sourced lo- is for 20 years. We’ve also recently began pitching the franchise to
cally, but many of our other products are imported; our cheese is college students. We think this a good opportunity for both us and
imported from New Zealand which ensures high quality. them because the China job market is really difficult for new gradu-
ates, so a good option for those with a little
Why has Subway kept its menu and ingredients start up capital is to become general man-
consistent with the American model agers of their own store.
when other QSR groups like Mc-
Donalds have made so many ad- What happens if these owners, for
aptations? whatever reason, violate the fran-
Since Subway is a complete fran- chise agreement either with quality
chise model, the R&D and introduc- concerns or unapproved changes?
tion of a new product must be in close We require that franchise owners
coordination with the Subway HQ in work in the store and understand every
the United States in order to maintain little aspect of Subway, no matter what it is.
consistency and food safety. Brands like We give evaluations every month to every single store. If
KFC and McDonalds have their own R&D safety or anything is out of compliance they receive a letter from us
facilities in mainland China and are able to release products into the and could lose their franchise. To protect the brand image we’re very
market much quicker. If every franchisee here did its own research strict at upholding our international standards.
and development, Subway would be less able to control quality con-
sistency and food safety. However, localization is an important part What will be the biggest challenge with your job going forward?
of our China market and on March 1st we will introduce our first It will definitely be maintaining brand consistency with high
China based product, a duck breast sandwich, to be launched in growth. Our goal in Shanghai by the end of 2010 is to have 55 stores
Shanghai. open, up and running.
www.supplychains.com MARCH/APRIL 2010 25
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